What Recession? Why Year Over Year Profits Are Up 75%

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My wife just closed the books on our mid year numbers (January – June) and sales are up significantly! Once again, we both are amazed at how our little wedding linens store has managed double digit growth for the 3rd consecutive year.

Of course our growth has slowed from last year when we managed to increase profits by 147%, but a 75 percent profit increase isn’t anything to sneeze at either.

I admit that it is a bit early to start celebrating since only half a year has elapsed. In the back of my mind, I know that many bad things can happen during the latter half of the year that may negatively impact sales.

But I am optimistic that we can maintain this pace since our busiest months (November and December) have yet to come.
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Here are some of the highlights of our half year numbers

  • Year over year revenues up 72%
  • Year over year profits up 75%
  • Organic conversion rate increased by roughly 8%
  • Traffic to the store increased by 91%
  • Our margins went up by 3%

So what has changed since last year that caused this increase in sales? It might have something to do with the following changes we made this past year.

I Redesigned The Entire Store

Though it’s hard to correlate what made the biggest difference, I think that the redesign of our online store had the largest effect on sales. Of course, I’m probably biased since I devoted several weekends and countless hours doing the redesign.

But coincidently, despite the fact that sales were slow at the beginning of the year, conversion rates shot up in April right soon after the launch of the redesigned store on March 15th.

Once again, it’s impossible to to make a definitive determination, but there is a strong positive correlation between sales before and after the redesign.

In any case, the old version of our online store was essentially a beautified version of the out of the box OSCommerce template. It served us well for a few years, but a redesign was well overdue. Looks matter, they really do.

Our Traffic Nearly Doubled

I’m not sure exactly what caused our traffic to increase by 91%. Ironically, our page rank actually went down a notch but the search traffic levels went way up so I’m having a little trouble understanding the correlation of page rank to the actual rankings.

If anyone knows how this works, please fill me in but it seems as though page rank doesn’t mean as much these days.

In any case, my wife and I continue to add new content pages to the store and this strategy seems to be working.

I Pruned Our Adwords Ads

I’m not sure why but the conversion rates for our Adwords ads have gone down fairly significantly this year. I really have no idea why. I just know that the same keywords that were converting well for us last year just weren’t converting at the same rate.

So I went through every single keyword and did a ROI analysis for each search phrase. If the keyword didn’t make us money, I threw it off the list.

For the words that were borderline, I reduced the maximum bid amount. For the words that were converting well, I upped the bids a little bit.

I also experimented with a few of Google’s new automatic adwords bidding optimizations, maximizing for clicks and maximizing for conversions. What I found was that both of these options could not beat the performance of my manual manipulation of keyword bids.

When I selected “maximize for clicks”, I did get a few more clicks for my money, but the conversion rate seemed to be worse. When I selected “maximize for conversions”, Google started making bids so high that I blew through my daily budget way too fast.

Personally, I found that Google’s “Maximize for conversions” option was somewhat deceiving. At first glance, the description leads you to believe that you are paying by the conversion when in fact it is merely placing higher bids for keywords that are more likely to convert.

It makes sense in practice and I’m sure it works for some people, but just not for our store.

In any case, by adjusting my bids accordingly, I managed to salvage my conversion rate on Adwords. Today, I pay less money for more clicks at a decent conversion rate.

We Increased Our Automation

One of the big purchases we made early on in the year was a brand new embroidery machine. Even though this machine cost us almost as much as a new car, it decreased our product fulfillment time by well over 33%.

Buying an industrial machine also provided us with a better quality product as well with fewer breakdowns and interruptions.

Believe me, it was a difficult decision to make but when we ran the numbers, it was a no brainer. In the grand scheme of things, the increased productivity far outweighed the cost of the actual machine.

It also probably seems like common sense, but we really should have invested this money in new capital equipment a long time ago. Unfortunately, frugality is a trend that is hard to break for us.

Whenever I end up spending money to improve efficiency, I always end up kicking myself that I didn’t do it earlier. It’s good to be cheap most of the time but not when it comes to saving time.

Can This Little Store Grow Even More?

To be honest, things are growing so quickly that it has to taper off at some point. If you look at the raw numbers, traffic to the store increased by 91% yet revenues only increased by 72%.

We need to do a better job of monetizing the traffic that we receive. On the flip side, we also need to expand into other product categories in order to increase our growth potential.

In any case, I hope the latter half of the year is as good as the first half. My wife and I are going to focus on adding more products and content pages to our store. Wish us luck!

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16 thoughts on “What Recession? Why Year Over Year Profits Are Up 75%”

  1. Wow! I think I’m in the wrong business. :) Congratulations on your amazing growth with your store.

    1. Thanks Carla! Some of it has been just plain luck as well

  2. B7 says:

    Hi Steve,

    Great post and great business! Here’s some potential answers.

    Perhaps Adwords conversion rate went down because of competing ads. Maybe other people are running very similar ads, or your ad position changed. A great source for internet marketing is marketingexperiments.com.

    B7

    1. @B7
      Yeah, it could be competing ads, but it was the conversion rate that went down, not the click through rate. It had been a while since I had updated my adwords last. Looks like I have to check up on it on a regular basis to make sure that I’m not flushing my ad dollars down the drain.

      @Lin
      Thanks for the kind words. I’m not going to worry about Page rank too much. As long as my site traffic continues to increase, I’ll be happy.

  3. Steve, congratulations to you and your wife on your amazing growth! That’s spectacular, and with the continued concerns about the economy and jobs due to the recession, seeing business growth is a very good thing!

    I don’t know the technical answer to your question about page rank vs search engine traffic, but I recall reading some time back that PR isn’t nearly as important as getting search engine traffic via your targeted keywords. I’ve also posted your question on Twitter, so hopefully one or more “experts” will pop in and explain better. Congrats!

  4. Congrats on the success. I totally agree that we are not in a recession because if we really were than this kind of growth will not be possible. Also I’ve been able to grow my stock portfolio 4,000% in the last six months. Trust me, we are not in a recession!

  5. That’s awesome, Steve. Congratualtions!!!
    And hello from Kabul Afghanistan!

    1. Whoa! Hey Shea! I had no idea you guys had access to internet out there. Hope everything is going well for you. Be safe!

  6. Steve,

    Congrats on your growth and success. I found your feedback on AdWords’ automated bidding options of particular interest as we’ve had similar experiences with such automated features.

    To date nothing beats manual manipulation and management of a PPC campaign even though certain tools may facilitate some tasks, so you’re right on the money here.

    One other area you might want to take a closer look at is the search query report that Google has now integrated in the new interface (on the old interface you had to go into the reports section to see this data). Recently I’ve been seeing a lot of irrelevant search terms creeping in to various client campaigns especially through broad keywords. That said, we monitor this frequently and regularly update negative keywords and make other necessary adjustments to bids and keywords.

    You’ll also find this feature very useful in identifying additional keywords that convert well for you that aren’t already in your campaign, but for which you’re getting traffic because of broad of phrase match keywords you do already have.

    That’s another strategy to employ – keep refining your keyword list based on actual search queries so that over time your campaign relies less and less on broad matched keywords to drive conversions for which you may be paying a premium on while triggering many unrelated search queries.

    I’d be happy to take a closer look under the hood for you to give you some more insights to further improve performance if you’d like.

    1. Hey Xurxo
      Good to hear from you again. I’ll definitely check out the search query report sometime this weekend. Most of my analysis was spent pruning adwords rather than adding new ones so perhaps I may be missing some high paying terms. I used to monitor my adwords performance monthly. But as time passed and I got lazy, I started checking in only quarterly and now bi-annually. I really need to check more often. Thanks for your offer! If I find my campaigns need improvement, I may take you up on that:)

  7. Hey Steve,

    Checking your adwords campaign more frequently is highly advisable as Google is constantly tweaking the system and sometimes a negative impact can occur in a very short period of time.

    On that note, keeping a close eye on your analytics solution is also a very good idea so that you can spot opportunities quicker and integrate them into your campaign.

    Don’t hesitate to let me know if you’d like me to take a quick glance, we often offer free campaign reviews to show potential clients where opportunities and problem areas are before they begin working with us on a more regular basis. This gives them a chance to see what we can do for them before they pay us anything.

    To your continued success!

  8. Jen says:

    Hi Steve,
    More power to you and your wife on your store’s success! Just to let you know, your blog has been inspirational to me. I’m the wife who wants to quit her job! I haven’t done so just yet but am starting to explore my options thanks to the experiences and valuable tips and advice you share in your blog! Just noticed that you do not have a link to your online store from this blog. Would love to visit your online store.

  9. Very inspiring! I have got lots to learn from you in doing adwords and operating an online store! To your continued success!

  10. Hi Steve!

    I really agree with you on AdWords this year, for this reason, I dropped all of my broad match keywords. Google is just getting too broad, and it’s jacking up bid prices. If you do decide to stay with broad match for some keywords, definitely try this Adwords/analytics hack from Get Elastic: http://www.getelastic.com/video-tutorial-hacking-google-analytics-for-keyword-research/

    The Search Query report in Adwords is useful–it tells you what keywords triggered your ads. But the above hack tells you what the user actually typed in–those are two different things.

    Great blog! Keep up the good work!

  11. Quinton Hamp says:

    Very cool stuff.

    On the increase of traffic, I’m curious which traffic channels increased. Was it organic traffic? Adwords traffic?

    It could be that even though your PR has dropped, the Penguin update in April (and the subsequent EMD update at the end of September), helped to eliminate enough of the spammier, made-for-Adsense (MFA) sites and allowed you to get a better ranking for long-tail keywords in their place.

    And then one thought about your increased Adwords pricing is that since April, Google has been sucking up so many of the top results with Adwords listings. Sometimes I’ve noticed that they aren’t as relevant to my search as they have been in the past.

    Numbers are fun. Good luck doubling them next year!

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